The next big tax battles: state by state

As voters and pundits focus on the inexorable winnowing to select a president, another national political effort could determine the ability of governors and state lawmakers to manage their finances. In the end, this could have as much impact on individual Americans as whoever occupies the White House next year.

Secure in the knowledge that President Bush and the Republican-led Congress are unlikely to raise federal taxes, antitax groups now are focusing on states. Such Washington groups as Americans for Tax Reform, the National Taxpayers Union, and Citizens for a Sound Economy are fanning out around the country, building local support and providing financial backing and political muscle to limit state taxes.

The focus now is on Oregon, where a ballot measure tuesday asks voters to decide between an $800 million revenue package and what some analysts warn could be dramatic cuts in education, healthcare, and other services if the measure - trailing in the polls - fails.

National antitax groups see the vote as a key test of their ability to influence public policy and politics beyond the Capital Beltway. And they bring to the battle considerable political clout. Citizens for a Sound Economy is headed by former House majority leader Dick Armey (R) of Texas. Grover Norquist, president of Americans for Tax Reform and one of the most influential activists in Washington, has been described as "the field marshal" of Mr. Bush's tax-cutting plan.

They've already proved their ability to influence events in Alabama, where Mr. Armey's group played an important role in the overwhelming ballot-box defeat of Republican Gov. Bob Riley's $1.2 billion tax package.

Although state economies are recovering from the recession of 2001, many still struggle with budget shortfalls. Faced with constitutional requirements that they balance their budgets (unlike Uncle Sam, who enjoys the cushion of deficit financing), some 20 states have raised sales or income taxes to avoid the most politically painful cuts in programs and services.

Virginia's Gov. Mark Warner (D) is arguing for a $1 billion tax increase to cover budget shortfalls on the way to an overhaul of the state's tax system.

But when voters themselves are given the chance to decide such things, their general inclination is to say "no." According to the National Taxpayers Union, 90 percent of the 50 major tax increases that appeared on state ballots over the past five years have been defeated. Last year's ouster of California Gov. Gray Davis and election of Arnold Schwarzenegger (who ran promising not to raise taxes) is only the most spectacular part of this trend.

Among the likely antitax efforts this year: resistance to California's Proposition 56 (on the March 2 ballot), which would eliminate the two-thirds legislative vote requirement to raise state taxes; opposition to a proposed tax hike in Pennsylvania; efforts to reduce the property-tax burden in Washington State; and proposals to reduce income, real-estate, and utilities taxes in Colorado.

Most political historians mark California's 1978 property-tax limitation measure (Prop. 13) as the genesis of the modern antitax era. "The tax revolt has ebbed and flowed over the past 25 years, but it has never really died out," says Peter Sepp for the National Taxpayers Union. More significant, he says, "Since the beginning of 2002, we've seen a major upswing in not only rejections of tax increases on the ballot, but approval [of], or at least more citizen groups circulating, measures that would reduce or limit taxes."

There now are an estimated 400 taxpayer groups across the country. In many places, the effort is led by governors and state lawmakers - most of them Republicans - who have signed a "taxpayer protection pledge" devised by Americans for Tax Reform. But it's also been the case, says Jonathan Collegio of Americans for Tax Reform, that some Republican lawmakers and governors have been "squishy on taxes while the activists and the Republican parties in the state are holding firm."

That was the case in Alabama, where the state Republican Party opposed Governor Riley's tax package. And it's true in Ohio. There, Gov. Bob Taft (R) signed a bill increasing the sales tax, while Ohio Secretary of State J. Kenneth Blackwell - also a Republican - is leading a repeal effort.

Mr. Collegio says it's significant that Republican governors with aspirations to national office - among them Jeb Bush in Florida and Rick Perry in Texas - have opposed tax increases. "Republican governors who are raising taxes - Kenny Guinn in Nevada, Bob Taft in Ohio, and Bob Riley in Alabama - have said, 'This is as far as I'm going in politics,' " he says.

A related antitax trend is the growing push for a state-level "Taxpayer Bill of Rights." This would limit increases in per capita state expenditures to the inflation rate, and any surplus revenues would have to be refunded to taxpayers. It's an idea being discussed in Idaho, Kansas, Minnesota, New Hampshire, Tennessee, and Wisconsin, says Max Pappas, a policy analyst with Citizens for a Sound Economy.

Colorado adopted such a measure in 1992, and supporters note that the state has done well financially since then.

"Having this system in place has made weathering the last recession substantially easier for Colorado because they didn't have all these programs that other states enacted during the boom years of the 1990s," says Mr. Pappas.